Panera Bread 2007 Annual Report Download - page 79

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Treasury Stock
Pursuant to the terms of the 2005 Long-Term Incentive Program (“2005 LTIP”) and the applicable award
agreements, the Company repurchased 6,594 shares of Class A common stock at an average cost of $43.62 per share
during fiscal year 2007, as surrendered by the 2005 LTIP participants. In the third quarter of 2000, the Company
repurchased 109,000 shares of Class A common stock at an average cost of $8.25 per share. The shares surrendered
to the Company by 2005 LTIP participants during the third and fourth quarters of fiscal 2007 and repurchased by the
Company in the third quarter of 2000 are currently held by the Company as treasury stock.
Share Repurchase Program
During fiscal year 2007, the Company purchased shares of Class A common stock under an authorized share
repurchase program. Repurchased shares were retired immediately and resumed the status of authorized but
unissued shares. See Note 11 for further information with respect to the Company’s share repurchase program.
16. Stock-Based Compensation
Effective December 28, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123R,
Accounting for Stock Based Compensation, which requires all stock-based compensation, including grants of
employee stock options, to be recognized in the statement of operations based on their fair values. The Company
adopted this accounting treatment using the modified prospective transition method, as permitted under
SFAS No. 123R; therefore results for prior periods have not been restated. The Company uses the Black-Scholes
option pricing model which requires extensive use of accounting judgment and financial estimates, including
estimates of the expected term participants will retain their vested stock options before exercising them, the
estimated volatility of the Company’s common stock price over the expected term, and the number of options that
will be forfeited prior to the completion of their vesting requirements. The provisions of SFAS No. 123R apply to
new stock options and stock options outstanding, but not yet vested, on the date the Company adopted
SFAS No. 123R.
Stock-based compensation expense in fiscal year 2007 related to stock options was $3.9 million, or $0.12 per
diluted share, which is net of $0.6 million of capitalized compensation cost related to new bakery-cafe construction.
The income tax benefit recognized for stock option expense in fiscal year 2007 was $1.4 million. Stock-based
compensation expense in fiscal year 2006 related to stock options was $5.9 million, or $0.18 per diluted share,
which is net of $0.7 million of capitalized compensation cost related to new bakery-cafe construction. The income
tax benefit recognized for stock option expense in fiscal year 2006 was $2.2 million. Cash received from the
exercise of stock options in fiscal 2007 and 2006 was $6.6 million and $7.7 million, respectively. Windfall tax
benefits realized from exercised stock options in fiscal 2007 and 2006 were $3.7 million and $4.3 million,
respectively. SFAS No. 123R also requires that the cash retained as a result of the tax deductibility of increases in the
value of share-based payments be presented as a cash inflow from financing activity in the Consolidated Statements
of Cash Flows, whereas, prior to the adoption, these amounts were presented as an operating activity.
As of December 25, 2007, the Company had one active stock-based compensation plan, the 2006 Stock
Incentive Plan (“2006 Plan”), and had options and restricted stock outstanding (but can make no future grants) under
three other stock-based compensation plans, the 1992 Equity Incentive Plan (“1992 Plan”), the Formula Stock
Option Plan for Independent Directors (“Formula Plan”) and the 2001 Employee, Director, and Consultant Stock
Option Plan (“2001 Plan”).
2006 Stock Incentive Plan — In March 2006, the Company’s Board of Directors adopted the 2006 Plan, which
was approved by the Company’s stockholders in May 2006. The 2006 Plan provides for the grant of up to
1,500,000 shares of the Company’s Class A Common Stock (subject to adjustment in the event of stock splits or
other similar events) as incentive stock options, non-statutory stock options, restricted stock, restricted stock units
and other stock-based awards. As a result of stockholder approval of the 2006 Plan, effective as of May 25, 2006, the
69
PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)